A New Theory of Impossibility, Impracticability, and Frustration

Yehonatan Givati, Yotam Kaplan

Research output: Contribution to journalArticlepeer-review

Abstract

Contract law offers three closely related excuse doctrines: impossibility, commercial impracticability, and frustration of purpose. These doctrines, which allow courts to release parties from their contractual obligations under extreme and unforeseeable circumstances, were central to contract disputes in the aftermath of the COVID-19 pandemic. Yet despite their importance, and despite decades of scholarly attention, these doctrines remain a puzzle, widely considered difficult to explain and justify. Existing economic theory sees contractual excuse doctrines as a risk-allocation mechanism; although highly influential, this standard theory leaves many questions unanswered. We offer a simple economic model explaining contractual excuse doctrines by focusing on avoidance investments, that is, investments by contractual parties designed to escape their obligations and wriggle their way out of their contracts. We show that the proposed model offers a straightforward explanation for contractual excuse doctrines, illustrating their underlying logic and accounting for the key patterns observed in courts’ decisions.

Original languageAmerican English
Pages (from-to)377-416
Number of pages40
JournalJournal of Legal Studies
Volume52
Issue number2
DOIs
StatePublished - Jun 2023

Bibliographical note

Publisher Copyright:
© 2023 by The University of Chicago. All rights reserved.

Fingerprint

Dive into the research topics of 'A New Theory of Impossibility, Impracticability, and Frustration'. Together they form a unique fingerprint.

Cite this